LIBOR Index Change (Commercial)

LIBOR INDEX CHANGE INFORMATION FOR ADJUSTABLE RATE MORTGAGE (COMMERCIAL)

The LIBOR index, currently used to determine interest rates for many loans and lines of credit, will no longer be available after June 30, 2023. This will affect all loans and lines of credit that use the LIBOR index to determine interest rate.

We’re following the guidance of the Alternative Reference Rate Committee (ARRC) to move existing loans and lines of credit from LIBOR to an alternative index in a way that's fair and transparent.

What this means for you:

• If Old Second loan or line of credit pricing is based on the LIBOR index. A new index will be assigned to your loan at your first-rate adjustment following June 30, 2023.
• In preparation of this transition, Old Second may discontinue offering the LIBOR index as a pricing option for new loans and loans at renewal, and may offer one or more alternative indexes for loan pricing. After December 31, 2021, Old Second will no longer use the LIBOR index for pricing loans.

ADDITIONAL RESOURCES

Read more from the Alternative Reference Rates Committee

LIBOR INDEX CHANGE FAQ

Why is the LIBOR index going away?

On March 5, 2021 the administrator of LIBOR, the ICE Benchmark Administrator (IBA) and the Financial Conduct Authority made a public statement announcing the permanent cessation and non-representativeness of LIBOR. The IBA and the FCA each publically announced stated that the 26 LIBOR settings set forth in the table below will permanently cease to be published immediately after the respective dates set forth below.

The FCA further stated that, while the 9 LIBOR settings set forth in the table below may be published on a “synthetic” basis after the end of 2021 (in the case of JPY LIBOR and GBP LIBOR) and after June 30, 2023 (in the case of USD LIBOR), such LIBOR settings will no longer be representative immediately after the dates set forth below and representativeness will not be restored.

Banks, financial institutions and governments have been working to identify options for replacing LIBOR. In many cases, an index based on the Secured Overnight Financing Rate (SOFR) will be used to determine the interest rate for loans and contracts previously based on the LIBOR index. Banks, financial institutions and governments may choose to utilize other alternative indexes that are broadly used including Prime and the constant maturity treasury (CMT) index.

Does the change to LIBOR only impact Old Second loans?

No. All loans and financial products that are based on LIBOR are affected.

What is Old Second doing about changes to LIBOR?

We’re closely following recommendations offered by consumer advocacy groups and the Alternative Reference Rates Committee (ARRC), and have developed a transition plan to replace LIBOR with a replacement index that is fair and transparent.

What is the ARRC?

ARRC is a group of private market participants created by the Federal Reserve to help ensure a successful transition from LIBOR. You can learn more about ARRC from their website: https://www.newyorkfed.org/arrc.

What index will replace LIBOR?

It is expected that the SOFR (Secured Overnight Financing Rate) index will replace LIBOR for most loans and lines of credit. SOFR is the replacement rate recommended by the Alternative Reference Rates Committee (ARRC). Banks may also consider additional replacement indexes for LIBOR, including Prime and the Constant Maturity Treasury (CMT) index, which are widely utilized for pricing Commercial loans and lines of credit. We will keep you informed of all changes to your loan or line of credit, including the replacement rate.

For more information on the discontinuation of LIBOR, see the ARRC website: https://www.newyorkfed.org/arrc.

When will my loan or line of credit change to the new index?

A new index will be used to determine the interest rate when your loan has its regular interest rate adjustment after June 30, 2023. Until then if your loan pricing is based on LIBOR, your interest rate will continue to be based on the LIBOR index.

What happens if I my loan or line of credit matures prior to June 30, 2023 and requires renewal?

Old Second may choose to discontinue its use of the LIBOR index for loan pricing at any time and may choose to offer an alternative index for pricing your loan. After December 31, 2021, Old Second will no longer offer the LIBOR index for loan pricing. Loans originated before December 31, 2021 may be based on the LIBOR index and then transition to the new index after June 30, 2023.

How will you keep me informed about changes to my loan?

We want to ensure you have the information you need during this transition. We will:

• Post updates to OldSecond.com as new information becomes available.
• Deliver information by email or mail as the transition approaches.
• Send updates by email approximately 90 days before LIBOR ends. Make sure your contact information is current on OldSecond.com to ensure you receive these updates.
• Send updates by mail and email when your loan is updated to the new index, and as your new interest rate and payment effective dates get closer.

Will the change to the SOFR index increase my payment?

The change to the SOFR index alone won’t necessarily increase your monthly payment.
With any variable rate loan, the interest rate (and therefore the payment) can increase whenever you have a scheduled interest rate adjustment, regardless of the index that's used.

Can the interest rate index be changed without my permission?

The original loan documents (specifically the note), allow for the index of a variable rate loan or line of credit to change if the index is no longer available.

Does this change affect fixed rate loans?

No. Mortgages with a fixed rate will not be impacted by the LIBOR transition.